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Fed Chairmanship Decision is Due Within Days; Gavin Newsom’s Romp
GROWING FRICTION between the Democrats’ populists and the party’s moderates is breaking out on several fronts — including tax hikes considered too wimpy by the left. Another heated battle, headed for resolution within days, focuses on who President Biden will nominate as Chair of the Federal Reserve.
PROGRESSIVE DEMOCRATS, led by Sen. Elizabeth Warren (D-Mass.) are adamant that Chairman Jerome Powell, a registered Republican, is not sufficiently aggressive on regulatory policies. They have lobbied the White House to nominate Fed Gov. Lael Brainard as the next Chairman; she has a much more aggressive track record on regulation.
OUR BOTTOM LINE is simple: Powell is the clear favorite — he’s the ultimate monetary dove, perhaps the most dovish Fed Chairman ever, which obviously makes him popular on Wall Street. He’s also highly regarded by Congress; the Senate undoubtedly would confirm his nomination for a second term, starting in late February.
BRAINARD, ON THE OTHER HAND, would encounter opposition in her Senate confirmation hearings; according to this morning’s Politico, Republicans may revive “paperwork issues” that surfaced when she was nominated for a Treasury post in 2009. She reportedly failed to disclose late tax payments and errors on legal forms for her household employees.
THAT’S NOT ENOUGH TO KILL A BRAINARD nomination, but Biden needs to conserve his political capital; his sweeping tax and spending proposals face a bruising fight, and then there’s the debt ceiling extension. A fight over Brainard would be a distraction; a Powell nomination would have an easier path.
BIDEN HAS SIDED WITH PROGRESSIVES more than we expected — it’s the path of least resistance in the House — so it’s possible that he will go for a registered Democrat like Brainard as Fed Chair. But the last thing Biden needs is a grouchy stock market; Wall Street quite clearly favors another Powell term, which we think he will get.
CALIFORNIA, WHAT A TRIP: It has the world’s fifth largest economy, 52 House seats in play next year, and the country’s largest population — about 40 million, far above second place Texas, which has 29 million — and an increasingly controversial image on guns, voting rights and abortion.
DESPITE FIRES, HOMELESSNESS AND VERY HIGH TAXES, California still has a mystique; Max Scherzer and other athletes want to play there, and seemingly every day is sunny. After Gavin Newsom’s landslide last night, California has still another presidential hopeful (See: Richard Nixon and Ronald Reagan).
NEWSOM BRINGS BAGGAGE to the national stage, and he can be slippery, but that applies to virtually every other politician who’s eyeing 2024 and beyond. If Joe Biden doesn’t run in 2024 (we think he will not), Newsom has a decent chance to defeat another Californian, Kamala Harris, for the Democrats’ nomination.
WE HAVE NO IDEA who will win in 2024 but we know this: the country wants fresh blood, someone who’s sharp and quick and forward-looking. Watch out for the charismatic Newsom, 53, who would begin a presidential campaign with 74 electoral votes in his pocket from California, Oregon and Washington.
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